“How we intend to support 20, 000 businesses”

Almost a year since its establishment, the Development Bank of Nigeria said it has supported over 5000 MSMEs access startup capital. In this interview, the Managing Director of the bank, Mr. Tony Okpanachi, is hopeful that the bank will meet its target of 20,000 businesses in its first year.

In one year of operation what is the level of percentage that the SMEs regulators have benefited from the bank?

You will recall, 1st of November last year we started our learning activities with 3 microfinance institutions. We have made available to them almost 5 billion, this was supposed to be for several SMEs. Since we are a whole sale institution we work through financial institutions, so when they come we make a line available to them so as they come with their clients we draw on the line.

What is available now to the 3 micro finance institutions is N4.9 billion so that is about 9 billion currently available. So as they are bringing their clients on board, we sign. Beyond that we have started bringing on board some commercial banks which you can see on our website, we have also made lines available to them, so as they come we draw down the line and that’s when we will begin to give actuals. But am glad to tell you that we have almost 9 currently on our list both commercial and micro banks and between now and the end of June we expect more commercial banks. So as the commercial bank come up, knowing they have more of the volumes, we will hear more from them.

What are the mechanisms put in place to ensure that the proposals of the micro finance bank meets the criteria?

For us, we receive the exact request, check the tenure and the terms of condition offered before we disburse, so we disburse for on-lending not for life for them to hold on to. We have a mechanism within our system that ensures that the funds hits the account of the end borrowers within 72 hours. Beyond that, we follow up on t hem to see the impact made by the borrowing.

For example, we check if it had created more employment, has it increase turn over, has it increase revenue to enable them pay more taxes when necessary, we look out for all of these. So we don’t just create the lines for the banks alone, like I said we made available 5 million so we draw down as they bring the client so it is not just giving the money to the bank alone, that is what we do differently, we ensure that haven made the money available the banks bring clients.

Do you have uniform interest for borrowers?

No, it depends on the risk profile of the institution. It is not flat for everybody as some based on assessment may be more risky. Knowing that we take the risk of the financial institutions, we assess them and rate them, so that brings about the risk premium for each.

What upper limit, if any, do you have?

The upper limit is tied to the weight we attach to the risk of the rating, there is a minimum criteria you must reach for you come on the DBN rating. Depend on the institution risk profile. For our rating we have a model which is a bit complicated due to the many factors in our rating. The difference from our rating may not be more than 100-200 basis point depending on the risk profile.

The upper limit is a function of the risk premium, for PFIs who are below investment grade is 1.5 with reference to the market rate.

How far have you gone with de-risking the industry and providing capacity to PFIs?

That is also on-going, if you recall that we have a unit with the ministry called the project implementation unit, the idea is to have different unit handling the capacity building issues so that we are not distracted from the core mandate of lending and they have sent out RFPs expression of interest for consultants to come in and the process id on-going, then the next stage is to ensure that the consultants are short listed and we identify which PFIs need this capacity building and allocate consultants to them. In the process of appraising the PFIs, some of them that does not meet our criteria we identify ways we can help them, that’s where the technical assistant comes in.

The idea is that even if a firm does not qualify today, we work with them to make them qualify. The overall objective is to create more access for the SMEs.

How you thinking of helping the young graduates who may want to start up, knowing that they may not be able to meet up criteria?

Part of what we are doing differently is that we are ready to form status, like this capacity building we are telling the financial institution that once the projects come and they assess it we are ready to take up the risk with them to give funding for start-up.

Subsequently, we are going to come up with product that we are going to sell through these financial institutions for such institutions again that is down the line. For now we want the buy in of the financial institutions themselves so that we tell them the fund is available for them and we are willing to fund start-ups.

Do you think you are meeting the target of 20,000 SMEs?

We are working towards meeting the target, as I said earlier we are in our first year of operation. Now DBM is a start-up, there is a process of startup, I said first year of full operation so you are going to start the follow up this year so we have full operation in place. We were licensed on 29th of March last year, we took process of setting up structures that took some time and because we are whole sale we are going to partner with some financial institutions to bring them board before we can now begin to lend to them. I can assure you that we are on course.

How many have you done so far?

In terms of the number of SMEs, so far request from them is over 5000.

At your maiden interface with the media where you were unveiled, I recall you said you are targeting 20,000 MSMEs in the first year. You are about a year now; do you think you are meeting the target?

We are working towards meeting the target. Remember, I said our first year of full operations. DBN is a startup and there is a process to start up. But now we have a full house so we will start from this year. We now have full operations in place now. We were licensed on 29th March 2017. The process for setting up the structures would take some time. Also because we are a wholesale bank, we will partner with financial institutions and that means we will have to bring them onboard to lend to them. I can assure you we are on course.

So far how many MSMEs have benefited?

So far, the request from the PFIs for MSMEs is beyond 500. But like I told you, as they make requests and meet the conditions, we fund them.